23Q2 The year-on-year decline in revenue narrowed. Waiting for channel adjustments to be put in place, demand recovered, and purchases were maintained
DIA Co., Ltd. released its semi-annual report. In 2023, H1 achieved revenue of 1,242 billion yuan (yoy -40.45%), net profit of 53.41 million yuan (yoy -90.77%), net profit of 49.36 million yuan (yoy -110.07%), after deducting non-net profit of 49.36 million yuan (yoy -110.07%).
Among them, Q2 achieved revenue of 537 million yuan (yoy - 37.88%), a narrower decline compared to Q1, and net profit to parent - 47.52 million yuan (yoy -123.45%). In the context of insufficient demand for inlay, sales in the company's stores are under pressure, and H1 has optimized and adjusted some inefficient stores. Taking into account store adjustments and the relative rigidity of some sales expenses, we lowered our net profit for 23-25 to 5.7, 7.3 billion yuan, and 870 million yuan (previous values of 950, 120, and 1.48 billion yuan). Referring to Wind Comparable's unanimous expectation of 15xPE in 2023, considering that the company still has a lot of room for future growth, we gave the company 30xPE in '23, with a target price of 43.2 yuan (previous value of 47.4 yuan) to maintain the purchase.
Revenue has declined, gross margin is relatively stable, and sales expenses are relatively rigid, so the cost ratio has increased markedly
In 2023H1, the decline in the company's revenue was mainly due to a 42.39% drop in the number of customers to 113,000; of these, single-store revenue from direct-managed stores was 1,617 million yuan, a decrease of 56.41%, and the single-store revenue of affiliated stores was 1.775,500 yuan, a decrease of 51.56%. 23H1's gross margin was 69.29%, down 1.34 pct year on year; of these, 23Q2 gross margin was 68.54%, down 1.40 pct year on year, and the performance was relatively stable. 23H1's sales expense ratio was 55.86%, an increase of 23.88pct over the previous year; of these, 23Q2 reached 65.16%, an increase of 27.02 pct over the previous year. This is mainly due to the rapid expansion of stores in '22. While revenue has declined, rent, decoration amortization, and sales staff remuneration are relatively rigid.
Stores have entered the adjustment stage, and asset impairment has released some pressure. Company 23H1 has actively adjusted its channel strategy and optimized inefficient stores. In Q1/Q2, 8 and 7 new stores were opened, 9 and 18 stores were closed respectively, and there was a net decrease of 12 stores. As of 23H1, the company had 676 stores. As the quality of store operations improves, we believe that overall store efficiency is expected to gradually recover under the impetus of wedding demand. In addition to the channel strategy, the company 23H1 also calculated an asset impairment of 55.27 million yuan for stores that showed signs of a reduction in holdings.
The largest share of diamond rings in the world, awaiting channel adjustments and demand recovery
According to Sullivan, according to global diamond ring and engagement ring sales volume in 2020-2022, DR had the highest market share for three consecutive years. The company adheres to a long-term brand strategy, focusing on brand upgrading and optimizing low-potential stores for 23 years. Single-store efficiency is expected to gradually recover.
Risk warning: The recovery in wedding demand fell short of expectations, and the optimization of store operations fell short of expectations.